A quiet rift on DU over inflation

[Kurt_and_Hunter]

To me, the moment someone says "hyper-inflation" I know I am dealing with a hardcore teabagger... the smile, nod and back toward the door sort of "whatever you do don't make eye-contact" teabagger.

But there is a lot of that catastrophic inflation sentiment on DU also. (Much from people who I am sure are highly intelligent and solidly progressive) I honestly don't get it.

My whole life runaway inflation is a boogey man the pugs use... that terrible thing that would happen if Democrats ever took over. Jimmy Carter was run out of office over inflation. Inflation is some terrible Democrat (sic) thing that Reagan conquered.

Every time you borrow money you are making a bet with some huge financial institution. You are betting on inflation and they are betting against it. And since they run everything they will do what it takes to make sure you lose that bet.

Inflation hurts people who 1) are holding debts like mortgages, 2) are holding bonds, 3) are holding cash. (i.e. wealthier people)

And one of the slickest tricks they ever pulled was to convince laborers that they shared an interest with capital on one of the, if not the central economic questions.

I don't know where the hyper-inflation argument from the left even comes from.

The RW economic view is simplistic: One dollar is worth the total money supply divided by the number of dollars. Print a dollar and every dollar goes down a certain amount, thus raising prices a certain amount. (And even if literally true, which it isn't, the RW view that money-creation is a=a equal to inflation still misses the fact that most money the Fed creates is in the form of authorizing banks to create it in loans. So even Fed creation of money doesn't create any money unless there is a level of demand in the economy. Most of the money the Fed has created the last few years is hypothetical money that the economy is too weak to turn into actual money.)

The moderate LW view (Keynesian) is that inflation is a function of money supply as well as really important factors like aggregate demand. (This is what ties inflation to unemployment.)

For the last few years we have been "printing" (not literally) dollars around the clock but aggregate demand is low. RW economists said, this will be inflationary and started talking about Wiemar Germany and Zimbabwe even in early 2009. Keynesian stripes of economist said, "no... this cannot create inflation with demand this low. When unemployment is 10% it will be almost impossible to create inflation no matter how hard we try."

The LW has been vindicated by events so far. What the left economists predicted has come to pass and the RW just keeps moving the goal-posts... "Okay, maybe next year we will see the hyper-inflation." (And assumes, for no reason whatsoever, that if big inflation showed up we would be unable to do anything about it, which is nuts. We would raise rates a little and stop increasing the money supply. Duh.)


I honestly don't get it... the whole inflation concern thing is a stock RW deal, like the gold standard and lower taxes for rich people.

[lumberjack_jeff]

1. I'm 48. My first mortgage was 12% financed by a special state bond.

And it was like winning the friggin' lottery.

I can remember being insulted to get only a 15% pay raise, because the cost of living was going up much faster.

Don't minimize the harm which came from double digit inflation. But I'm not minimizing the harm that came from Reagan's cure (unemployment) either.

[Kurt_and_Hunter]

8. We are the same age. I remember it well.

And I remember the recession Volker engineered to defeat it well also.

The mind-set that baffles me is to have an almost moral binary view of inflation as good or bad, and that somehow cannot conceive of 3% or 4% inflation despite having experienced that as the norm for our lives. That inflation must be either 0-1% or else Wiemar Germany.

O know why Glen Beck peddles this stuff. It argues against government action and (more importantly) all his advertisers are various gold scams.

But why does anyone on the left buy into it? Do they want a contracting or flat money supply? Is that likely to help anyone except the super rich?

I am all for not having double-digit inflation. But we absolutely need some single digit inflation... 3%, 4%.

The Fed has been working over time to try to create some modest inflation and it is not working. And for some reason some people assume there is no incremental quality to the process... that the inflation money must be secretly working in a cave somewhere storing up inflation that will then explode. I am amazed that any people think we would go from zero to double digits over-night and that no central bank action could prevent it.

[Joanne98]

2. Deflation is coming. The conservatives LIE!

[hedgehog]

3. People tend to talk as if economics is controlled by a single, linear equation.

In fact, what we see is can be described as the result of the interaction of any number of equations, most of them non-linear.

For example, "X" may cause inflation provided that "Y" is below a given number and "Z" is increasing. If "Y" and "Z" are decreasing, maybe "X" then causes hyper inflation. Maybe if "W" is below 2, the inflation rate is below 5%, but if "W" goes above 2, the inflation is tied to the cube of "X".

Sometimes deficit spending is actually good for the economy, but try explaining that to people who absorbed their economics at the supper table 40 years ago and haven't learned a new thing since!

[madinmaryland]

4. The scary thing is that deflation is much more insidious than inflation.

Our society is based on inflation and goods becoming worth more as time passes. Deflation turns everything upside down. Scary shit.

[Exilednight]

5. Deflation keeps the economy from growing, thus giving employers a reason .............

not to offer raises. The reality is, prices are going up, just look at Wal-Mart.

[hedgehog]

6. It's easy to bring an economy to a screaming halt. Starting things

moving again, not so easy. I'm no fan of the big auto companies, but if GM and Chrysler had come crashing down, a lot more people would be in a world of hurt today. I'm even willing to accept that saving the big banks may have been the only way to protect the rest of us from the worst.

That said, I want the banks broken up so that we are never again faced with "too big to fail". We need to figure out how to keep huge corporations from dominating our economy, too. Central planning is central planning, regardless whether the person responsible is the commissar or the VP for manufacturing.

[Ichingcarpenter]

7. The six hundred billion will devaluate the Us currency

Short term good..... long term ....... very bad.

For a short time...? Good returns on the market
but the market really doesn't give a fuck on the long term

But we mu patronize them?..... Don't we

Its a short sighted vision... We need
to challenge the sight that got us into this mess

Not .......play its game anymore.

We did that long enough